Sonoma County home sellers stayed in the driver’s seat in 2016

Home sellers remained in the driver’s seat of the Sonoma County real estate market in 2016.

Looking ahead, agents and brokers keep wondering what it will take to get more of them to put their houses on the market in 2017.

A decreasing number of homes for sale last year resulted in higher prices and slightly lower sales, according to The Press Democrat’s month-to-month ?housing report, compiled by Pacific Union International senior vice ?president Rick Laws.

As home values kept rising, five of ?15 communities tracked by the Multiple Listing Service in the county set new records last year for annual median prices, surpassing old peaks reached in 2005 in the midst of a national real estate bubble.

Four of the five communities have the highest annual median prices in the county: Healdsburg, Sebastopol, Sonoma and west Petaluma. The fifth is the Oakmont senior community in east Santa Rosa.

In 2016, buyers purchased 4,663 single-family homes in the county, a decline of nearly 4 percent from a year earlier. Of that number, just 304 sales were completed in December, the lowest volume for the month since 2007, a time when housing prices were in free fall.

Despite the decline in sales, the total value of all houses and condominiums sold in the county rose last year to ?$3.56 billion. That was an increase of ?6 percent over 2015.

The total dollar volume increased because of rising prices. In 2016, the annual median price for single-family homes rose more than 9 percent from a year earlier to $580,000.

Brokers attributed both the county’s lower number of sales and higher prices to the lack of homes on the market. They maintain that the market has plenty of buyers.

“The people are there,” said Grace Lucero, director of investment sales for Vanguard Properties in Healdsburg. “There’s just no inventory.”

The data support that view. Sellers last year placed 5,425 single-family homes on the market as new listings, a decline of 7 percent and the lowest number since Laws began tracking listings in 2009.

In contrast, in 2011 at the bottom of the market, sellers listed 6,700 such homes. The difference is that half the single-family homes sold that year were foreclosures or short sales, the latter being properties sold for less than the amount owed on the mortgage.

In contrast, financially distressed properties made up just ?4 percent of last year’s single-family sales.

That there are fewer listings helps explain why the county ended the year with a supply of available homes that would last only 1.6 months at the current pace of sales. The smaller inventory made it difficult last year for buyers to find acceptable homes and to make winning offers for properties, brokers said.

“We’ve stayed in a strong seller’s market,” said Gerrett Snedaker, a partner in Better Homes and Gardens/Wine Country Group, based in Sonoma.

Even so, many prospective sellers seemed reluctant to list their homes for sale. The reason, brokers said, is that in a market with limited selections, those homeowners likely doubted they could can find a suitable replacement property.

The county real estate market has seen five straight years of significant price gains following an unprecedented housing crash.

Before the crash, the county’s home prices rose in 2005 to a record annual median of $595,000 - now just 3 percent above the comparable figure for 2016. That same year, the county’s real estate brokers sold a record ?$4.41 billion in houses and condos.

But the housing bubble burst, and the county’s single-family median price tumbled to an annual low of $325,000 in 2011. Since then, the annual median has increased 78 percent.

Last year, the annual median price for condominiums rose ?11 percent to $328,000. That remains 11 percent below the record high of $369,889 set in 2005.

Snedaker said home prices appear to have rebounded better in Sonoma County than in adjacent Napa County. He speculated that Bay Area buyers, especially those looking for second homes, are finding Sonoma County a little easier to reach by car.

Among the county’s most desired locations is Healdsburg, where prices have been at record levels for two years. The old annual median price peak in 2005 was $719,000, but it was surpassed in 2015 with a new record of $805,823. Last year, the annual median rose again to $858,975, an increase of 7 percent.

Among the nicer homes Lucero sold in the town last year was one on Tucker Street near the Healdsburg Plaza. The property sold for $2.49 million and included a new four-bedroom, 3.5-bath main house, plus a pool and a second, one-bedroom unit.

“It’s strong demand,” Lucero said of the market there. “Many people want to live right here in Healdsburg.”

Four other county communities also have surpassed their 2005 price records: Sebastopol, with an annual median last year of $805,000, an increase of ?14 percent from 2015; Sonoma, at $759,500, an increase of 9 percent; west Petaluma, at $758,750, an increase of 12 percent; and Oakmont, $617,000, an increase of 14 percent.

As values have risen, It has become increasingly difficult to find properties selling for what used to be starter-home prices. Last year the number of homes that sold for less than $400,000 was half the number sold in that price range in 2015.

Meanwhile, the number of homes sold last year between $500,000 and $999,999 jumped ?17 percent and homes selling for $1 million or more increased ?13 percent.

Laws said the increasing sales are a good sign for the move-up and luxury market segments. But the rising prices also have made home purchases beyond the reach of most county residents.

Only 27 percent of county households could afford the median priced home here in the third quarter of 2016, then valued at $580,500, according to the California Association of Realtors. A buyer would have needed a minimum income of $112,840 and would make monthly mortgage payments of $2,820, including taxes and insurance.

One reason home choices seem so limited is that there has been so little new housing built in the county in the past eight years. But home construction is finally starting to come back, said Cary Bertolone, an owner of Bertolone Realty in Santa Rosa.

“People are actually breaking ground and building homes,” Bertolone said. The numbers to date have been small, but they still are a sign of an improving economy and “in the future we should have more housing” coming to market.

That could persuade more homeowners to put their properties on the market, brokers said, as they see more options for their next purchase. Another impetus to act may be the threat of higher interest rates, a prospect the Federal Reserve has signaled for 2017. Higher interest rates prompt concern that prices may fall as the cost of mortgages rises. As a result, both buyers and sellers may decide to try to complete a deal sooner rather than later.

“That will get some folks off the fence,” said Steve Dick, manager of Better Homes Realty in Santa Rosa.

What 2017 holds for home sales once more will depend on how many sellers feel this is a good time to put their properties on the market, brokers said.

“I think the real estate business is going to be OK,” Laws said, “but it won’t be a banner year unless sellers make up their mind that this is the year to get it done.”

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com.